Information regarding the change performance fee methodology for the HSBC GIF SICAV

Transcription

1 HSBC Global Investment Funds Information regarding the change performance fee methodology for the HSBC GIF SICAV The HSBC Global Investment Funds ( GIF ) Board has decided to amend the calculation methodology used for funds where a performance fee is applied. The following questions and answers provide further information. Date: 1 st of November 2012 For Professional Clients only

2 When will the change take effect? The new methodology will start on 1 December Any positive performance fee already accrued in a share class will be crystallised on 30 November 2012 according to the existing performance fee methodology and will become payable. How will the shareholders be informed of the change? A shareholder mailing will was issued on 26 October The shareholder letter is disclosed in Appendix 1. Which GIF funds are impacted by the change? HSBC GIF European Equity Absolute Return HSBC GIF GEM Equity Absolute Return HSBC GIF GEM Debt Total Return HSBC GIF Global Currency HSBC GIF Global Macro The list of activated share classes at the fund level is disclosed in Appendix 2. What are the key benefits of the new methodology? The new methodology will: 1. Use more market standard parameters (e.g. high water mark) and facilitate competitor analysis 2. Use annual instead of daily accrual of hurdle rates 3. Carry forward the hurdle rate into future years 4. Be easier to compute and reduce calculation risk How does the performance fee work under with new methodology? 1. Performance fees are calculated at share class level. 2. The performance fee per unit is calculated vs. the hurdle rate since the beginning of the performance period (which runs normally from the first valuation of December to the last valuation of November) 3. The daily performance fee accrual (in $, or other base currency) is the daily change in (1) multiplied by the number of units currently in issue. This can be a positive or negative number. 4. The cumulative performance fee can then be calculated, except that it is zero if the unit price performance (before deducting accumulated performance fees) is below that of the hurdle rate, since the start of the year. 5. Any performance fee accrued on redeemed units is crystallised (by taking the proportion of redeemed units to the number of units in issue), and the cumulate performance fee adjusted. 6. The principle of the high water mark will operate. 2

3 7. At the start of the performance period, the hurdle rate is set at the high water mark. If, at the end of the performance period, the fund s Net Asset Value is below the hurdle rate and a performance fee is not paid, then the high-water mark for the following year will be the past year s high water mark plus the hurdle rate performance. 8. Annual crystallisations will be on the same date for each share class in each fund (on the last valuation of November). 9. The new methodology will start on 1st December On the transition to the new methodology, the new high water mark for each share class will be the higher of the low tide mark and the Net Asset Value per Share on 30th November When a dividend is declared on a share class (ex-dividend) the value of the dividend will be back into the calculation. 12. The performance fee is calculated on the basis of the unadjusted Net Asset Value per Share (e.g. before the application of any sales charge or pricing adjustment that might be applied to the Net Asset Value per Share to mitigate the effects of transaction costs). 13. The methodology could be adapted for stockmarket benchmarks. 14. The features of the proposed new method can be summarised as: Accrues for share issues and redemptions Crystallises performance fees on share redemptions Compounds hurdle rates correctly Can be adapted for stockmarket benchmarks Uses a high water mark A glossary listing the key technical terms used to describe how the performance fee is calculated is disclosed in Appendix 3. What is the difference between the low tide mark (existing methodology) and the high water mark (new methodology)? The low tide mark is reset every time the performance fee accrual turns negative. The new methodology will carry foreword losses against a hurdle into future years. e.g. if in a year the high water mark was 100 and the hurdle rate was +5%, then in the following year the high water mark would be the greater of 105 and the year-end NAV. What impact will the change have for shareholders? The new methodology will have no adverse impact for shareholders: No change is made to the current hurdle rates No change is made to the current performance fee rates Will shareholders incur any additional charges as a result of these changes? The cost of migration to the new methodology will not be met by the shareholders. There will be no increased costs for shareholders as a result of this change. 3

4 Does this change require regulatory approval? Yes, the new performance fee methodology was approved by the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg regulator through the update of the Prospectus dated October Will there be any changes to the way the Net Asset Value per Share prices are calculated? No, the Net Asset Value per Share prices will continue to be priced in line with the prospectus. Will shareholders still be able to trade during the migration phase? Yes, shareholder dealing will continue to operate in line with the prospectus. 4

5 Appendix 1 - Shareholder mailing HSBC GLOBAL INVESTMENT FUNDS Société d'investissement à capital variable 16, Boulevard d'avranches, L-1160 Luxembourg Grand Duchy of Luxembourg R.C.S. Luxembourg No. B Luxembourg, 26 October 2012 Dear Shareholder, We are writing to inform you of some changes being made to the performance fee calculation applicable to the following sub-funds of HSBC Global Investment Funds ( GIF ): - European Equity Absolute Return; - GEM Debt Total Return; - GEM Equity Absolute Return; - Global Currency; and - Global Macro. The board of directors of GIF (the Board ) has reviewed the way the performance fee is currently calculated for the abovementioned sub-funds (the Sub-Funds ) and has decided to amend the calculation method which now may be summarised as follows: For each Sub-Fund, the performance fee will be calculated at the share class level and accrued at each valuation of the Sub-Fund, and will be paid to the management company at the end of each performance period (which runs normally from the first valuation of December to the last valuation of November), or on the net redemption and/or conversion of shares, if earlier. The Sub-Funds will only accrue a performance fee on a share class in the event that both of the conditions below are met: 1. The share class return, since the last valuation of November, outperforms the relevant hurdle rate (as disclosed for each share class in the Prospectus); and 2. the net asset value of that share class is higher than the high water mark. When the share class return underperforms the relevant hurdle rate and/or the net asset value decreases below the high water mark, no performance fee will accrue until such an underperformance or decrease has recovered. If, on the last valuation of November, the net asset value per Share is below the relevant hurdle rate and a performance fee is not paid, then the high water mark for the following year will be the past year s high water mark plus the Hurdle Rate. More details on the performance fee calculation may be found in the Prospectus which will be available at the registered office of GIF or on the following website: If you require further information, please do not hesitate to contact your local HSBC office or your financial adviser. The Board accepts responsibility for the accuracy of the information contained in this letter. Yours faithfully, For and on behalf of the Board of Directors HSBC Global Investment Funds 5

6 Appendix 2 - List of share classes activated (as at October 19 th ) ISIN code Fund Name Share Class LU HSBC GIF European Equity Absolute Return L1C LU HSBC GIF European Equity Absolute Return L1CHUSD LU HSBC GIF European Equity Absolute Return M1C LU HSBC GIF European Equity Absolute Return M1CHGBP LU HSBC GIF European Equity Absolute Return M1CHUSD LU HSBC GIF European Equity Absolute Return ZC LU HSBC GIF GEM Debt Total Return J1CHJPY LU HSBC GIF GEM Debt Total Return L1C LU HSBC GIF GEM Debt Total Return L1CHEUR LU HSBC GIF GEM Debt Total Return L1D LU HSBC GIF GEM Debt Total Return L1DHEUR LU HSBC GIF GEM Debt Total Return M1C LU HSBC GIF GEM Debt Total Return ZDHEUR LU HSBC GIF GEM Equity Absolute Return L1C LU HSBC GIF GEM Equity Absolute Return L1CHEUR LU HSBC GIF GEM Equity Absolute Return M1C LU HSBC GIF GEM Equity Absolute Return M1CHEUR LU HSBC GIF GEM Equity Absolute Return M1D LU HSBC GIF GEM Equity Absolute Return ZC LU HSBC GIF Global Currency L1C LU HSBC GIF Global Currency L1CHCHF LU HSBC GIF Global Currency L1CHEUR LU HSBC GIF Global Currency L1CHGBP LU HSBC GIF Global Currency L1CHJPY LU HSBC GIF Global Currency L1CHSEK LU HSBC GIF Global Currency M1C LU HSBC GIF Global Currency M1CHEUR LU HSBC GIF Global Currency M1CHGBP LU HSBC GIF Global Currency M1D LU HSBC GIF Global Macro L1C LU HSBC GIF Global Macro L1CHGBP LU HSBC GIF Global Macro L1CHSEK LU HSBC GIF Global Macro L1CHUSD LU HSBC GIF Global Macro L1D LU HSBC GIF Global Macro L1DHGBP LU HSBC GIF Global Macro L1DHUSD LU HSBC GIF Global Macro M1C LU HSBC GIF Global Macro M1CHCHF LU HSBC GIF Global Macro M1CHGBP LU HSBC GIF Global Macro M1CHNOK LU HSBC GIF Global Macro M1CHSEK LU HSBC GIF Global Macro M1CHUSD LU HSBC GIF Global Macro M1D LU HSBC GIF Global Macro M1DHGBP LU HSBC GIF Global Macro R1C LU HSBC GIF Global Macro ZCHGBP 6

7 Appendix 3 - Glossary A number of technical terms are used to describe how the performance fee is calculated. These are explained in the glossary below: Hurdle Rate Current Day NAV Crystallise Crystallisation Net Asset Value per Share Return Performance Period Performance Rate Prior Day NAV High Water Mark The hurdle rate against which the performance of each Share Class is measured for the purpose of calculating the performance fee. Details in respect of each sub-fund are set out in Section 3.2 Sub-Fund Details of the Prospectus dated October The Hurdle Rate will be applied on the base currency of the sub-fund, except for Currency Hedged Share Classes, where the Hurdle Rate will be applied on the currency of that Share Class. The Hurdle Rate is solely used for performance fee calculation purposes, and should not be considered as indicative of a specific investment style. The Net Asset Value per Share in a particular Share Class in the sub-fund, including an accrual for all fees and expenses, adjusted for any dividend distributions, and excluding any performance fee that has been accrued. The point at which any performance fee becomes payable to the Management Company, even if it is paid out at a later date. Crystallisation will occur either at the end of the Performance Period or at each valuation where there is a net redemption and/or conversion of Shares. Calculated at each valuation as the difference between the Current Day NAV per Share and the Prior Day NAV per Share. The Performance Period runs normally from the first valuation of December (included) to the last valuation of November (included), except as noted below: 1. Shares issued during the Performance Period will run from the first subscription date to the following last valuation of November. 2. If all Shares in a Class are redeemed during the year, the Performance Period will end on the last redemption date of the Shares. The Performance Rate is variable and defined at the sub-fund level. Details for each sub-fund are set out in Section 3.2. Sub-Fund Details of the Prospectus dated October The Net Asset Value per Share in a particular Share Class in the sub-fund, including an accrual for all fees and expenses, adjusted for any dividend distributions, and excluding any performance fee that has been accrued. For the first Performance Period of a Share Class the initial Net Asset Value per Share. In subsequent Performance Periods, the High Water Mark will be the higher of: (a) the Net Asset Value per Share of the Share Class at the end of the previous Performance Period where a performance fee has been paid out, adjusted by the accumulated hurdle since the last performance fee was paid out, and dividends, if any; or (b) the Net Asset Value per Share at the end of the previous Performance Period, adjusted by dividends, if any. To implement the new performance fee mechanism, the new High Water Mark for an existing Share Class on 3 December 2012 will be the higher of the Low Tide Mark and the Net Asset Value of that Share Class on 30 November

8 This document is intended for Professional Clients only and should not be distributed to or relied upon by Retail Clients. The views expressed above were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target. HSBC GIF funds are sub-funds of HSBC Global Investment Funds, a Luxembourg domiciled SICAV. UK based investors in HSBC Global Investment Funds are advised that they may not be afforded some of the protections conveyed by the provisions of the Financial Services and Markets Act HSBC Global Investment Funds is recognised in the United Kingdom by the Financial Services Authority under section 264 of the Act. The shares in HSBC Global Investment Funds have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United States Persons. All applications are made on the basis of the current HSBC Global Investment Funds Prospectus, Key Investor Information Document (KIID) and most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ. UK, or the local distributors. Investors and potential investors should read and note the risk warnings in the prospectus and relevant Key Investor Information Document (KIID). Any performance information shown refers to the past and should not be seen as an indication of future returns. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Stockmarket investments should be viewed as a medium to long term investment and should be held for at least five years. HSBC Global Asset Management (UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment products and services of the HSBC Group. This document is approved for issue in the UK by HSBC Global Asset Management (UK) Limited who are authorised and regulated by the Financial Services Authority. Copyright HSBC Global Asset Management (UK) Limited All rights reserved / FP